Article | Harvard Business Review | March 2011

The New M&A Playbook

by Clayton M. Christensen, Richard Alton, Curtis Rising and Andrew Waldeck


Companies spend more than $2 trillion on acquisitions every year, yet the M&A failure rate is between 70% and 90%. Executives can dramatically increase their odds of success, the authors argue, if they understand how to select targets, how much to pay for them, and whether and how to integrate them. The most common reasons for making an acquisition include holding on to a premium position or cutting costs. But to realize those benefits, the acquirer needs to achieve economies of scale by absorbing the target's resources into its operations. CEOs, who are often unrealistic about the performance boost from such acquisitions, must be sure not to pay too much for them. A less-familiar reason for making an acquisition is to fundamentally change a company's growth trajectory. In those deals, the acquirer uses the target's business model as a platform for growth. Because the business models with the most transformative potential are often disruptive, they can be difficult to evaluate, and CEOs often believe that such acquisitions are overpriced. In fact, however, those are the ones that can pay off spectacularly.

Keywords: Mergers and Acquisitions; Business Model; Disruptive Innovation; Growth and Development Strategy; Integration;


Christensen, Clayton M., Richard Alton, Curtis Rising, and Andrew Waldeck. "The New M&A Playbook." Harvard Business Review 89, no. 3 (March 2011).